Monthly Archives: January 2004


NEITHER A BORROWER NOR A LENDER BE � especially not a lender

Another friend of mine is caught in the American legal system. This isn�t the first guy to experience the latest swing of the pendulum away from civil liberties and toward undue punishment for actions that are not completely understood by or, worse yet, are misrepresented to the judge and the jury. Some federal prosecutors are more concerned with their won-loss records than in how they play the game.

Our system is based on the notion that the truth will emerge through competent advocacy. The system, however, relies on the integrity of its participants. Long ago prosecutors discovered it was very hard to gather the evidence needed to meet the �beyond a reasonable doubt� standard. Some of these prosecutors, who maybe didn�t fully understand the complexities of a situation, or maybe who just decided that they knew someone was guilty, have compromised their integrity to elevate their own reputations and secure convictions.

As a lender, Larry (I have changed all the names, for obvious reasons) is being blamed for something his former client did. At the end of January, if he isn�t granted a re-trial, he will likely go to prison, leaving a wife and three children destitute. All because he lent someone money and trusted the wrong people.

Larry Jacobs, the owner of Nameless Financial Services, had lent money to Ben Rogers. Nameless had a large number of borrowers at the time, and Rogers was one of them. Rogers was selling a benefits package, including a supposed credit card, through telemarketing.

At the time of the activities mentioned in Larry�s first trial, Nameless wasn�t lending Rogers new money. However, to get its money back, Nameless had an agreement to get paid a small amount of money from each sale made by Rogers.

Rogers probably was cheating consumers. Part of the package he offered often included a credit card or debit card that he probably couldn�t deliver.

To make certain it was paid back its loan, Nameless opened bank accounts to receive sales proceeds generated by Rogers. Nameless kept a small piece of the proceeds and sent the rest to Rogers.

This system didn�t work because irate consumers requested refunds. The account in which money was received was later debited in large amounts because of chargebacks. The result was that while Nameless should have had its position paid down considerably, it ended up around $400k more in the hole to Rogers.

By mid March 2000, it became clear that Rogers was cheating Nameless in many ways and was also probably cheating customers. At the advice of Nameless�s attorney, Nameless basically took over the business operation of Rogers, including his employees.

This new operation was called Newco. (Isn�t it always?) The credit card offer was eliminated in the short term. A new credit card offer was put in place a few months later. Larry struggled to right the company, while losing $1 million.

When Nameless took over the company, it found an operational and financial disaster. Necessary contractual relationships with third party vendors supplying benefits weren�t documented correctly. The sales effort wasn�t monitored well, allowing sloppy and even fraudulent sales. Many (not all) consumers probably didn�t get what they bargained for; fulfillment was slow, and the entire business stank.

Although Larry tried to straighten things out, Rogers was indicted, and so was Larry. The theme at the trial was that the Nameless� Newco was simply a continuation of what Rogers did — an operation established to cheat people.

Although the government knew it was not telling the whole truth, in its eagerness to get a conviction in the Rogers case, it also convicted Larry, saying he was the mastermind and, in fact, ran all aspects of this scheme.

Employees who were questioned by the government were not called as witnesses if their stories didn�t fit into the prosecution�s picture that Nameless Financial Services was the real culprit. If a potential witness stated that Larry did not commit a crime, then the government would scream and and threaten that witness. On one occasion, when a witness refused to implicate Larry, the Asst US Atty, threw a book on the meeting room table and walked out of the room.

In exchange for deals or immunity, witnesses perjured themselves. The judge and the jury were misled concerning the complexities of the situation. And Larry was convicted, to be sentenced January 30.

If this were the first time I had heard a story like this, I wouldn�t even involve myself, thinking the storyteller was biased. But this is the fourth time in a single year that a person I call a friend has been caught up like this in a legal nightmare that costs him (her) time, money, reputation, friends, and even health.

Something�s wrong in our legal system. I suspect it�s because we have come to measure a persons worth by their successes or victories; concepts like integrity and ethics played well in old Jimmie Stewart movies, but that was long ago. Today, they just don�t pay the bills.

It�s extremely difficult in an age of elaborate business structures, complex relationships, and high technology to guarantee that the prosecution, judge or jury will be competent to decide a man�s fate. When a prosecutor manipulates the system by distorting the truth in the name of justice, there is little hope that a judge and jury will reach a correct result. .

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Although it’s still going on,

Although it’s still going on, Sundance 2004 is over for me except for the afterglow. It’s always a fascinating experience, and it has only become more so with the further progress of digital technology. For the first time, digital video can be shot in something called “24P,” which is the same number of frames per second as film, and allows the finished product to have a “filmic” look. More and more films are shot in digital video, for economic reasons, and at the director’s panel I attended, almost all the participants were from New York, not Hollywood. DuArt labs, an old company my mother used to work for when she got out of high school, has apparently become a cutting edge source of digital technology.

Not that every indie filmmaker wants his film to look like a Hollywood production, but for the ones who do, it’s all possible. In fact, with tne new special effects software that has come out, even Industrial Light and Magic might be in trouble; the mystery of “how they do it” is gradually becoming available to anyone with a HandyCam and a Mac G4. We at actually already own that equipment, and so do people from all over the world.

Which is why the cab driver told us that this year not all his passengers cam from Los Angeles, and why the world cinema and world documentary entries to the festival played to full houses.

Apparently, only fifteen of the 137 films at the Sundance Film Festival have a distribution agreement before they arrive. I try not to see those; I can see them at home.

Garden State, a first feature by the actor from “Scrubs,” which of course I have never seen because it’s on TV, not in a theatre, has captured all the buzz, as the critics say. Its about a guy who comes home to New Jersey for his mother’s funeral and slowly re-connects with the realm of emotion after spending most of his childhood anaesthetized by lithium. It had some extremely good moments, but the actor-writer-director needed a better editor; it would have been better without some of its more tangential scenes. But you will see it, because it’s a coming of age movie without a lot of sex and violence, and it will invariably be the best choice available at your local cinema. Miramax and Searchlight did a joint venture right at the Festival to distribute. Natalie Portman plays the woman who liberates the hero from his drug-induced waking coma, and she does it by being too cute for words (and for me).

Riding Giants, on the other hand, rocked. I thinkit was one of the best visual experiences of this year’s Sundance. It is about the evolution of big wave surfing, about which I don’t care at all. But the function of a documentary is to open a window on a world you may know nothing about, push you out that window, and let you learn from the fall. I fell into the world of big wave surfing wholehearedly during Riding Giants. The photography is beyond belief. And the history of surfing turns out to be pretty funny.

You always ask yourself what happens to surfers when they reach middle age, and here we got to see all the middle-aged surfers showing their private home movies about their wacko lives on the Hawaiian beaches during the ’60s. And we can also see how, with the advance of board technology, younger surfers no longer have to swim out to a wave — they can be towed out or helicoptered out to waves larger than buildings.

Naturally, most of the elderly pioneers turned out to be entrepreneurs, founding surfboard manufacturing companies in both Hawaii and California. (Risk tolerance, anyone? Collaboration, anyone?) This film should be mandatory in entrepreneurship school.

So much for the guaranteed releases. The other films I saw were all part of the world cinema and world documentary categories, which were way more interesting for their ability to bring unfamiliar cultures alive than anything made in either New York or Hollywood.

The Good Lawyers’ Wife
is a Korean movie about the disintegration of a marriage when the wife has an adulterous affair with a high school sophomore. Of course her attorney husband has been having an affair forever, but the marriage doesn’t seem to unravel until she goes out to obtain her own pleasure. I’d say this movie is a marital tragedy, in which what appears to be the precipitating incident is actually a symptom of a far deeper and more longstanding problem. Once again I was struck by the violence that seems endemic in Asian society.

Fifteen is a digital documentary about the lives of fifteen-year-old gang members in Singapore, and the underbelly of that repressive society. The “actors” were true juvenile gang members, and the making of the film altered some of their lives profoundly; it gave them a way back into school and thus into mainstream society. One of them, however, tried to go back to school and was rejected for all his tattoos — another symbol of Singapore’s repression. It was the director’s first feature, and he told us during the Q&A that it depicted his own life ten years ago. It was banned by the Singapore government, which gave it enough buzz in the rest of the world to get it a distributor and force the government to rescind the ban.

For his next film, this young man is making a musical thanking the government censors of Singapore for banning his film and inadvertantly jump-starting his international career!

Principles of Lust is a film chronicling one man’s fear of becoming merely a middle class suburbanite, and the extremes to which he goes to try to escape mediocrity. It’s a fascinating movie that you may never see, because it contains male frontal nudity, cunnilingus, fellatio, and an orgy. The orgy is real, filmed at a swingers’ club in London, although the movie itself is set in Sheffield, a dreary former mill town. The star came up after the screening and answered questions, and I asked him how he felt about all this, and he said it had been a real problem for him, but that he wanted to help the director (a woman and a grandmother) explore the theme that you can’t know what’s really worthwhile if you never have enough experience from which to draw comparisons.

Another interesting aspect of the film is that it has scenes in which jaded cosmpolites wager on juvenile boxing matches in which the kids (about age eleven) get beat up pretty cruelly. The lead actor was asked how the parents of those children felt about letting their children appear in the film, and he said both sets of parents were on the set at all times, and that non of the children were really hurt. Sounds like one of those movies about animals that has to get a seal of approval from P.E.T.A.

We had to stand in line for almost four hours to see The Corporation, a Canadian documentary about the history of the corporation and its influence on the environment and society. We were all disappointed. The subject matter’s great, as is the academic expert testimony (did you know that corporations originally were chartered to exist at the will of the state for only a short and specific period of time to do a single activity? Like build a bridge?), but the technique — compared to what we had been seeing — was amateurish, and the editing primitive. It looked like a classroom instructional film from the fifties. There’s still a great movie to be made about the impact of the corporation, but that movie will probably be a Dilbert-like dramatization, like the BBC show “The Office.”

Nina’s Tragedies, which won eleven Israeli Academy Awards, is Israel’s entry into the Hollywood awards as well. It’s about a young boy who is in love with his aunt, and the diary he keeps. I’m sure it will be released in the US. It’s good enough — another coming of age story — but not great.

And that’s all I saw. Long lines and a short stay bested me.

So here’s my takeaway from Sundance: digital video is quickly replacing film, and lots of old Hollywood types are scrambling to learn new technologies or hire high school kids to create their special effects.

Marriages are universally tricky, and everyone faces the problem of whether they are still necessary, no matter what country you are from. Remind me to tell you about the short preceding The Good Lawyers’ Wife.Many filmmakers are young men or women, and the films they submit to Sundance are often autobigraphical. It’s “Portrait of the Artist as a Young Man” over and over again.

Western culture is pretty decadent.

Asian culture is very violent.

You can take these generalizations to the bank. (But only with an actress attached).

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Stealthmode Partners, in case you

Stealthmode Partners, in case you didn�t know it, is an accelerator for early stage companies and companies in transition. Almost everyone I see during the business day is an entrepreneur of some sort. I love entrepreneurs; they�re the only people with whom I feel comfortable � they�re as crazy as I am.

But something must be happening to them, or to me. In the short time since New Year’s Day, I’ve been asked to find money for at least a half dozen companies. One of them did not even have a business plan. One of them had a plan that I knew was unrealistic, because I know more about their market space than they did. And one of them had a product that wasn’t ready for prime time. I acted like a customer and tried to use it– that�s how I knew it wasn�t ready. Of the six, only one had a business plan that I felt at all comfortable sending around for further study.

I was also approached by someone who is not yet in business, but has a good idea and wondered who would fund him to explore it.

Surely this is all some sort of joke.

I do invest in companies. I invest money, time, and energy. I usually invest in the riskiest round: the friends, families, and fools round. I also connect entrepreneurs to funding sources. That’s what Stealthmode Partners was formed to do. Even under the most fortuitous circumstances (good idea, good team, good timing, good market), it’s really difficult to get a business off the ground. Our company was formed to help people. (This is my third career.) Do you think we, or anyone else, want to invest in a company that hasn�t spent enough time analyzing its own chances for success?

Because I was fed up with looking at bad business plans, I took myself off to Kansas City last July to the Kauffman Foundation, went through its trainng program, and became the southwest regional headquarters for its FastTrac Entrepreneurial Education program. I formed alliances with the Arizona Tech Council, the Greater Phoenix Chamber, and a bank. I found a space and began the combination group therapy, networking, and learning process that is FastTrac Planning. It is designed to help any company that needs to sharpen its competitiveness, refine its processes, and acquire investment.

ASU also has a new program, called Technopolis, that works with the high technology startups.

But for every person we reach through FastTrac ( or ASU reaches through Technopolis, six try to cirumvent the competency process by telling us they already have a business plan and �just need the capital.� In most cases, they�re dreamin�.

From my private consulting work in Stealthmode Partners and my facilitating of FastTrac, I�ve learned as much as the participants. I�ve also learned from the nonparticipants.

I�ve learned that many people don�t want their preconceptions about their business, or their business idea, challenged. They don�t want to devote much time to thought. They don�t really think they need to know how to read their own financial statements. They don�t want to hire market research help, competitive intelligence help, and often even accounting help.

They are willing to risk the entire business rather than sit down and think about the BUSINESS aspect of what they plan to do.

Bankers see this every day. That�s the biggest reason they turn down borrowers. Do you think they WANT to turn people down? They are in the business of lending money. I am in the business of supplying equity.Neither one of us wants to say no.

But we must. We�re just not that stupid.

I am offering my third FastTrac Planning program, for companies already in business and wishing to grow (and needing money of course)starting Feb. 4, and my first FastTrac New Venture, for new businesses, starting Feb.7. The former helps existing businesses analyze their strengths and weaknesses and make their business plans fundable. The latter helps people get started — or decide not to.

The cost for these programs is nominal –$750. And if you�re a veteran, the cost is reimbursed by the Veterans� Corporation ( I personally facilitate, with a wonderful roster of outside resources.

When you emerge from either one of those programs, or some form of equivalent training, THEN you can come to me with your business plan and ask me to invest or make a connection to someone else.

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Yesterday I went to the

Yesterday I went to the Inauguration Ceremony for the new mayor of Phoenix, Phil Gordon. Phil is an old friend of mine (and of everyone else�s as well), and it was a pleasure to see him sworn in. But the big surprise was the caliber of the ceremony itself.

These ceremonies are usually almost unbearable. They are always long, and provide an opportunity for everyone to say a few unnecessary words. Governor Napolitano weighed in, as did Senator McCain. While they were both articulate, they weren�t even listed on the printed program of speakers and entertainers.

But this ceremony proved to be thought-provoking, relatively inspiring, and definitely different. I hadn�t been to an Inauguration in over ten years, and things have really changed. The invocation, which used to be offered by only a token Jew and the local Christian cleric, was this year given by a Pastor, a Rabbi, a Gurukirin ( Sikh), an Imam(Muslim), Monsignor Ryle (Catholic), Bishop Barnwell (black), and Rev. Eve Nunez (female). It was preceded by a heart-stirring rendition of �My Country �Tis of Thee� and some flag waving by the first graders at Christ Lutheran School.

Ronnie Lopez, a long-time Hispanic community leader and political consultant, was the MC for the beginning of the ceremony, and he was accompanied by his wife, a cancer survivor. The pledge of Allegiance was led by a Hispanic Medal of Honor recipient, who came out on stage supported by a metal walker.

By the time we got into the swearing in (Phil accompanied by his wife and mother) and the political speeches, we had seen and heard from boys� choirs, girls� choirs, people of every color, background, size and shape. Some really good music, for 10 AM on a Monday. And at the end, there was even a Navajo Code Talker. Can you imagine what an effort it must have been to put together a program so rich in cultural diversity, so careful to be inclusive? In the past, no one would have even cared to try.

And what are the burning issues in the City of Phoenix? The platform on which Phil Gordon and his fellow council members got elected? Some predictable planks, such as increased transit, adequate resources for the Police and Fire Departments, and job growth through a vibrant technology economy.

But there were some really good issues I hadn�t heard before. Peggy Bilstein pledged herself to help end domestic violence, which she correctly pointed out impacted children most of all. And Phil asked everyone in the audience to buy a bench, put it in front of his or her house, sit outside and learn what happens in his own neighborhood. Phil�s bench, apparently, is outside AJ�s market at Central and Camelback, where he sits outside on Saturday morning and asks other customers their views. Apparently, he�s been of this opinion for a while: you can outwit crime and blight by simply getting to know your neighbors and watching out for them.

On balance, the ceremony convinced me that I was right not to move two years ago, when I contemplated throwing in the towel on Arizona and debarking to California. What a mistake I would have made. Look at the shape California is in, with huge budget deficits on both the state and municipal levels. Look at the earthquakes, the mudslides, the exodus of tech jobs from Silicon Valley and of tech workers back to India. Look at the housing prices, which have continued to rise through the jobless recovery.

Not that Phoenix is perfect. Phil�s going to have a hard job herding all the disparate cats into a consistent economic development policy and a drive to re-develop downtown. Over half of Phoenix residents have never even visited downtown, others drive to the ball games, get in their cars and drive back to the boonies. The Coyotes have decamped to Glendale, leaving disappoointed bar owners and restaurateurs to wonder where their business will come from.

But Phoenix is clearly on the move again, and in a positive direction. It was an impossible feat to get light rail started without Congressional support. But we did it. It was similarly impossible to get money out of the legislature for the Civic Plaza expansion in such a lousy budget year. But we did it. And who would have thought Michael Crow would have opted to give the University such a large presence in downtown Phoenix? All of this happened last year.

Time to make your real estate speculation on downtown. All the real speculators have been there for years.

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